In general I try to avoid overly political/critical posts but in this case, I’m making an exception. Recently, Time Warner Cable (TWC) decided to expand some metered bandwidth trials, and one market they decided to test it in is Greensboro, NC (my market). This has gone around in the press (online, newspapers, and even on the evening news) so much, it’s hard to not know about this even in other markets. Clearly, going from an “unlimited” plan to a metered plan will raise a few eyebrows (and a few protestors), and TWC in this case didn’t do their already low customer service ratings any favors.

To recap the situation (briefly), the current internet plans are basically unlimited, with a few different speed tiers. The proposed change meant that caps be instituted on the amount of bandwidth users could consume, ranging from roughly 5GB to 40GB per month, with overages of $1 to $2 per GB. That’s pretty shocking.

Time Warner Cable (NYSE:TWC) today announced it would alter plans to test Consumption Based Billing, shelving the trials while the customer education process continues.

Time Warner Cable Chief Executive Officer Glenn Britt said, “It is clear from the public response over the last two weeks that there is a great deal of misunderstanding about our plans to roll out additional tests on Consumption Based Billing.”

Actually, I think the only misunderstanding is with the TWC executives, and any victory of having TWC shelving these plans is likely to be short lived.

So, let’s begin with the crux of the problem. This is my bandwidth usage over the past few months (note, April is only half over):

The router firmware I’m using (Tomato) has the option to keep these numbers. TWC said it will be providing a “gas gauge” so users can see how much bandwidth they are using (even though they’ve temporarily ditched the metered plan). Having these numbers (caps or no caps) is a good thing.

I consider my usage moderate but reasonable for what I pay. I work quite a bit from home, download the latest bits and connect via VPN. I stream some Netflix, use LiveMeeting and do quite a bit of videoconferencing, play some online games from time to time, and … use VOIP and DirecTV VOD (more on that in a second). I certainly don’t consider my usage abusive. But under the original proposal from TWC, I’d be exceeding my $60/mo allotment by around 35+ GB, increasing my bill to nearly $100. TWC eventually increased the caps nominally to 60 GB for their top tier (which I’m on), which means my bill would instead be around $80/mo. That’s too high for the value I’m getting.

And, this will only increase over time due to more and more content delivered online. To address my earlier point, this definitely smacks of net neutrality (good article on that here). Clearly, I’d be facing a decision where I’d need to stop using DirecTV/Netflix VOD and my VOIP provider, in favor or TWC’s own VOIP and VOD offering, since – even though they are more expensive – would end up being cheaper as they wouldn’t count against my bandwidth cap.

Of course, TWC points out (here and here) that usage is on the rise, and “something must be done” … right? Er, no, at least not in this fashion. As a technologist, I’ll say this clearly: I’m not _against_ consumption based billing -- if it’s reasonable and not abusive. But even though usage is increasing, costs are dropping rapidly as well. And it’s pretty obvious why Time Warner chose the markets they did for these trials: they say it’s because the markets have a strong demographic mix that suites the trials, but the reality is, the markets have no competition – they wouldn’t do this in FiOS / Cablevision country, I assure you.

Since TWC likes to use so many apples to oranges comparisons, I’ll offer my own: the metered trial that TWC proposed is similar to having an unlimited cell phone plan, only to be told that – on the maximum plan – you’d be capped at 60 minutes per month with 25 cent per minute overages. For this reason, cell carriers have a large array of plans to work with whatever you need – and they also offer free weekends/evenings (that is, cheaper or free during non-peak time).

I like this analogy because my wife uses only minutes per month on her cell phone, needs no data, text, etc. So the fact that she pays less and I pay more is desirable – and in this spirit, I support tiered pricing. Suppose you have a second home and just want high speed internet for very light usage – wouldn’t it be nice to pay $15 or $20/mo for such a plan? Or, perhaps you’d like a second line as a backup (one DSL, one cable). Maybe you only check email and don’t need anything else. As a power user, I’m stymied that TWC offers a max 512K upload and I’d certainly be willing to pay a bit more for larger upload.

So what is the right way TWC can institute a tiered system? Here’s what I think:

1) Stop insulting the intelligence of the community. Certainly there are many non-technical users, but the majority of those who spoke out against the caps are generally more technically inclined.

2) Start offering the “gas gauge” so users can gain insight into their bandwidth usage. Put it on the bill. Even without caps, this is good info.

3) KEEP THE UNLIMITED PLAN IN PLACE AS IS, but begin offering cheaper, lower usage tiers. Allow customers to select that $15/mo, low-speed/volume plan if they’d like. If users in these tiers consume more data and go over, cap the fees at the unlimited price. That way, no user will ever pay more than they are paying today. This sends the message that tiered pricing can work and save consumers money.

4) Start using some of those profits to roll out DOCSIS 3. Start giving some reasonable, more cutting edge speeds. When FIOS/Cablevision customers can get 50/5 plans (or more) for less, a 384k upload with a low cap is barely a notch above dial up and is embarrassing. Before instituting any other caps that may make service more expensive, have added value/speeds such as DOCSIS 3.

5) Tiers need to have reasonable caps. The original 40GB (then 60GB) max caps are WAY too low. A “standard user” tier, at an absolute minimum, should be at least 100GB, and I think 125GB or 150GB is more reasonable: low volume tiers (1GB, 5GB, etc.) are fine, as long there are higher tiers for those who want them. These numbers can vary if the overages are more reasonable, too -- $1 per GB is an insane markup, particularly in the age of VOD and online rentals. A standard tier of 125GB should be roughly 25 cents per GB, at most. Power tiers (turbo and up) should offer 175GB, 200GB, and 250GB caps at various prices. I could see an “ultra” tier of the fastest speed they can give, with 250GB caps, 25 cent overages, for $89/mo. While TWC may think these caps are high, create it with the idea that these numbers will work for a couple of years before needing adjustment and just look at what the competition can offer without caps.

In any event, create plans that cater to everyone. I always wonder who needs the cell phone plan with 10,000 minutes per month with free weekends, but hey, someone is buying it.

6) During low usage times (weekends, mid-day, etc.) turn off the meter and make those times known. Some of us who use moderate amounts of bandwidth do so off hours. (I have a few apps that do backups and what not at 4 am, for example). “Reward” off-peak usage or meter only peak usage. Let’s not pretend that it’s cumulative usage of the network that is a concern – it’s concurrent load. That’s why phone carriers vary the pricing the way they do.

7) You really want to wow the customer? Auto-adjust the customer plan based on usage. Maybe I travelled 3 weeks this month and had no usage – why note cut me a break? Not willing to do that? Offer roll-over “minutes.”

Would I rather not have any tiered pricing? Probably. But, if it can be done in such a way that it offers me more value (that is, higher speeds, priority routing, etc.) I’d be supportive, even if I had to pay a little more. But to pay more (in some cases, more than double: the 10/1 unlimited plan would essentially be $175/mo!) for the same? No thanks.